Uhuru dims plan to build refinery for Kenya crude

President Uhuru Kenyatta said Sunday that Kenya would use the Lamu Port to export crude from the Turkana oil fields, dimming plans of building a refinery at the facility. FILE PHOTO | NMG

President Uhuru Kenyatta said Sunday that Kenya would use the Lamu Port to export crude from the Turkana oil fields, dimming plans of building a refinery at the facility.

Mr Kenyatta said Kenya’s oil would be exported in form of crude. The government had earlier announced plans to build an oil processing facility following assessments that the country’s crude oil deposits were insufficient to justify the construction of a refinery.

“Lamu will play host to the newest port on the East African coast, which will begin its operations initially as a transshipment hub for global shipping lines,” said Mr Kenyatta while addressing the nation during Mashujaa Day celebrations in Mombasa.

"It will be supported by a special economic zone that is expected to attract investors from across the world to undertake various economic activities and create jobs for our people," he added. "Our aspiration is to link the Lamu port, to the Lamu Port, South Sudan, Ethiopia, transport corridor through road infrastructure. Our aim being to make the Lamu the port of choice for transshipment, export of goods through the EPZ as well as exports of Kenya’s crude oil."

The port is Mr Kenyatta’s government initiative to develop a second deep sea port along the Kenyan coast. The first berth at the port is complete with the second and third berths expected to be completed by December 2020. Construction of the first three berths out of the 32 expected started with dredging works in December 2016.

Mr Kenyatta’s announcement Sunday underlines the government’s reluctance to build an oil refinery. Petroleum Principal Secretary Andrew Kamau had earlier said that a refinery would make money only when it has refining capacity of at least 400,000 barrels a day.

Kenya previously had a crude oil refinery in Mombasa but halted its operations in 2013 after plans for a Sh100 billion upgrade were abandoned on the advice of consultants who said they were not economically viable. The government took it over in 2016 and converted it into a storage facility.

In June, the government signed agreements with Total, Tullow Oil and Africa Oil Corp to develop a 60,000 -80,000 barrels per day crude processing facility for oil discovered in northern Kenya. In addition to the processing facility, a crude oil export pipeline from Lokichar in Turkana County to Lamu was also part of the deal.

"The infrastructure installed for the foundation stage will be utilised for the development of the remaining oil fields and future oil discoveries in the region, allowing the incremental development of these fields to be completed at a lower unit cost," Tullow Kenya had said earlier.

Kenya discovered commercial oil in 2012 in its Lokichar basin, which Tullow Oil estimates contains an estimated 560 million barrels in proven and probable reserves. Tullow has said this would translate to 60,000 to 100,000 barrels per day of gross production.

In August, Kenya shipped out 200,000 barrels of the Turkana crude to test the international markets’ reception of the country’s low-sulphur oil ahead of commercial production, which is estimated to start in the second half of 2023.